Calling the Canadian dollar’s performance on Friday a watershed, Dennis Gartman thinks the loonie may be moving back to parity with the U.S. dollar, or even higher.
Coinciding with his visit to Canada, the author of The Gartman Letter recapped the “truly unusual” events of Feb. 6, when January jobs reports were released on both sides of the border.
A worse-than-expected result saw Canada lose a whopping 129,000 jobs, bringing the unemployment rate to 7.2%. In the hours before the much more broadly followed U.S. employment situation report, the loonie fell sharply on the foreign exchange market – from $1.2375 (C$/US$) to nearly $1.2600.
However, after a dismal U.S. jobs report, the loonie began to strengthen. It rose further throughout the day to end on its highs relative to the greenback and stronger relative to the euro as well, Mr. Gartman wrote.
The news was horrid, but the response was bullish, and as we try often to remind our clients around the world, a market that does not fall on bearish news is no longer. For the C$ on Friday, this is particularly so.
Canada’s currency will return to par versus the U.S. dollar in as little as six months, Mr. Gartman told Bloomberg, citing a more stable political environment and a decline in commodity markets that has probably run its course. “I can feel myself getting ready to be quite bullish on the Canadian dollar.”
Bloomberg noted that Mr. Gartman’s call on the Canadian dollar is at odds with economists’ forecast. On average, 44 of them surveyed see the loonie weakening to C$1.25 by the end of June before rising to C$1.20 by the end of 2009. None expect parity this year.